Digital Markets, Competition and Consumers Bill

Baroness Stowell of Beeston Excerpts

Committee stage
Monday 22nd January 2024 Grand Committee

[Viscount Colville of Culross (CB)]

My Lords, I tabled Amendment 32 in my name, and I thank the noble Baroness, Lady Jones, and the noble Lord, Lord Clement-Jones, for adding their names. I also thank the organisations that helped me work on these amendments. Amendment 32 to Clause 20 would stop the Secretary of State from revising the criteria for the conduct requirement process. These criteria are already very broad, but subsections (4) and (5) give the Minister huge scope to alter the types of behaviour expected from the SMS as part of the CR process.

Amendment 22, in my name and that of the noble Lord, Lord Clement-Jones, aims to respond to government concerns about removing Clause 20(4) and (5), which are that it will prevent the Minister future-proofing the CR criteria by allowing the CMA leeway to alter criteria in Clause 19, which will open the way for the imposition of conduct requirements.

I also support attempts to encourage interoperability between user and digital activity in any way possible, so I support Amendment 20, in the name of the noble Lord, Lord Lansley, and Amendment 21, in the name of the noble Lord, Lord Clement-Jones.

On my Amendment 32 in Clause 20, the conduct requirements for the process will be hard-fought by the tech companies. The collaborative nature of the Bill will mean that the SMS will be very involved in setting up the regime, but it will also be following every possible avenue to ensure that the requirements are not burdensome to its businesses. However, subsection (4) gives the Secretary of State broad and unlimited time to be subject to lobbying and to change the nature of the contact requirements.

I have already given an example in my speech on Amendment 7 to show the lengths to which tech companies will go to affect the decisions of politicians in establishing an SMS designation. This amendment will have a similar effect of thwarting their attempts to interfere in the CR process. Over the last decade, a number of cases have been brought against the big tech companies by the EU anti-competitive regimes. As part of that process to rectify the anti-competitive behaviour, the regulators have laid out behaviour for the companies under investigation. These are sets of rules aimed to force the companies to change their conduct and reduce their dominance in the market.

The process is very complicated, and small tweaks can make the difference between success and failure of the rules and their ability to control anti-competitive behaviour. Implementation takes time. Consultation on the rules between the DMU, the SMS and other stakeholders can mean it takes up to six months to put into action, then it takes another several months before the market study on how the new conduct regime criteria are working can be assessed. In the meantime, the SMS continues to make huge profits, while the smaller competitors continue to suffer the loss of market activity.

My concern about the clause is that, even if the CMA comes across a new type of harm and can see clearly what remedy would apply, it cannot create its own remedy under the clause. This is most unusual for a regulatory body. Usually, the breach of law is investigated, and the remedy tailored by that body to proportionately fit the harm identified. The regulator is usually granted the power to craft the remedy itself.

The Government are keen to build a system which is speedy and effective, and so there is the list of tools that can be used as remedies in Clause 20, which is useful, but, instead of a speedy, sensible mechanism which would be in the hands of the expert regulator of digital markets, an additional step has been put in place. That additional step—going back to the Secretary of State to create regulations—is a slower and more complicated way to craft this remedy. The DMU must be left to use its professional expertise to set these rules.

At a later stage, we will be talking about the suggestion of the noble Baroness, Lady Stowell, to have some parliamentary committee involvement. I wonder why on earth we cannot have parliamentary committee involvement when looking at these particular Secretary of State powers and the way that the DMU would use them.

To deal with the concerns that the Minister might have about the lack of future-proofing, I also tabled Amendment 22. Its aim is to respond to claims by the Government that the removal of Secretary of State powers in Clause 20 will stop the future-proofing. Noble Lords know that, in the fast-changing digital world, even the most comprehensive list of criteria might not include all possible eventualities; my amendment deals with those concerns. It stems from the powers of the CMA to look at the objectives of the conduct requirements in Clause 19(5), which are comprehensive: they cover “fair dealing”, “open choices” and “trust and transparency”. Only conduct requirements of the permitted type in Clause 19(5) can be imposed under Clause 20 on the CR regime.

Clause 20 is currently a permitted list for the regime; in future, the CMA may want to change the criteria needed to achieve the objectives of Clause 19(5) as markets inevitably change. I suggest to noble Lords that Amendment 22 will achieve that. I have argued that the fear of the Secretary of State succumbing to the lobbying powers of the big tech companies is something to worry about. This small amendment will solve that problem and give flexibility to the CR process, without the danger of political interference.

[Baroness Stowell of Beeston (Con)]

My Lords, as this is the first time I have spoken in Committee, I declare that I chair the Communications and Digital Select Committee—but I am speaking in a personal capacity. This is quite an eclectic group of topics; it makes me wonder what will be in the group labelled “miscellaneous”.

I will talk about the leveraging principle, but before doing so, I acknowledge what has already been said about parliamentary accountability and the fact that I have an amendment in a later group. To pick up a point that the noble Viscount, Lord Colville, just made about his amendment to Clause 20, if we were to have a new Select Committee, there is no reason why, in the course of its business, it would not look at regulations being brought forward. I would expect there to be that sort of role for a Select Committee, but it would not replace the role of the Secretary of State in this context. We will come back to that when we get to the specific amendment.

The amendment on copyright is very interesting to me, not least because the Communications and Digital Committee is currently carrying out an inquiry on large language models. We are in the final stages of that inquiry and will publish our report very soon. We will have, I hope, some interesting things to say about copyright at that time.

I turn to my point on the leveraging principle; in particular, I will pick up on Amendments 26 and 27 in the name of the noble Baroness, Lady Jones. When the Communications and Digital Committee carried out our scrutiny of the Bill and held hearings in the summer, we looked at the leveraging principle and concluded that what was in the Bill was adequate; we did not propose any further changes being necessary. Noble Lords may remember that, at Second Reading, I raised concerns about how the Government had diluted various bits of the Bill that we, as a committee, had said, “Do not do that”. As I understand it, they have not diluted the leveraging principle. However, I am a great believer in judging people by their actions rather than by what they say. Over the last few weeks, I have been very interested in the various representations that have been made to me and others from the different challenger firms and industry bodies in this area. I see and am sympathetic to their concerns on this topic.

Only today, I was interested to read the Bloomberg daily newsletter on tech matters, which refers to the recent case in the US in which Apple has been forced to make some changes to its 30% fee policy. It has already started introducing things that make that almost meaningless to those who might benefit from it. The newsletter explains what people have to do to use a different payment system from Apple’s and avoid the 30% fee. It says:

“In order for developers to include a website link in their apps to an outside payment system, they’ll first need to submit a request form to Apple. If approved, the link can only be displayed once within the app. It must look like a text URL—meaning it can’t be a candy-colored button that says ‘Use PayPal’—and the text itself must match one of seven templates”.


It continues:

“When clicked, the link will surface a warning from Apple about the risks of transacting with third-party websites, with ‘continue’ or ‘cancel’ buttons. The website has to open in the device browser, rather than from a pop-up within the app, where, depending on the type of service, a user can sign in or register for a new account”;


in other words, you will not bother by the time you have got through all that.

That was a long-winded way to say that I am minded to support what the noble Baroness, Lady Jones, is seeking to do with the leveraging principle here. A safeguard is necessary, but, as I said at the beginning, I am speaking in my own personal capacity.

[Lord Vaizey of Didcot (Con)]

My Lords, I will slip in here quickly, since I have Amendment 25 in this group. I follow my noble friend Lady Stowell in supporting tightening up the leveraging principle as much as possible. We would have a lot more fun in this Committee if we stopped referring to the leveraging principle and started referring to the whack-a-mole principle, which is the same thing. From now on, that is what I will do.

As my noble friend said, it is absolutely critical to the success of the pro-competition regime. We all know how it works and may have used it in our own commercial lives. After years of litigation, you concede a point to the competition authority and reduce the headline prices you are charging for the app to appear on your platform, and then you slip in a new way of charging, as was so ably set out by my noble friend Lady Stowell. You find a different way to charge in order to generate exactly the same revenue.

I tabled Amendment 25 simply to strengthen the anti-whack-a-mole conduct requirement so that designated undertakings cannot shift their anti-competitive behaviour to non-designated activities, even if their ability to do so is directly linked to their strategic market status in a designated activity. Without this change, there is a danger in the current drafting of the CMA having to constantly designate new activities and play catch-up with the SMSs—or it may not be able to combat anti-competitive behaviour in any way at all.

The key point here is that Clause 20 allows the CMA to intervene only when an SMS firm’s conduct

“is likely to materially increase the undertaking’s market power”.

It is too narrow, and it gives these SMS firms broad opportunities to avoid compliance. For example, if Apple News was not designated, as things currently stand, Apple could impose unfair terms on news publishers via contracts, circumventing the terms where it holds the market power, where the action has been taken which would be in the App Store. To appear in Apple News, you would go one step behind, in terms of the contracts with the news publishers, and therefore avoid any remedy.

My amendment seeks simply to close potential loopholes. As I said, my noble friend Lady Stowell has ably set out what the whack-a-mole principle is all about: generating exactly the same revenues but being very creative in how you do so as you play this game with the competition regulator.

King’s Speech

Baroness Stowell of Beeston Excerpts

Tuesday 14th November 2023 Lords Chamber

[Baroness Stowell of Beeston (Con)]

My Lords, I am delighted that the long campaigned for Media Bill will be part of this Session’s legislative agenda. But today I want to concentrate on other issues that the Select Committee on Communications and Digital, which I chair, has examined recently, which relate to other Bills or government activity mentioned in the gracious Speech: namely, digital competition, how to deal with frontier AI and digital exclusion.

I start by emphasising the importance of the UK’s digital economy. Big tech firms have developed platforms and tools that are used and enjoyed by millions. We have countless digital and tech SMEs flourishing across the country. Consumers rely on services that are rapidly moving online. A well-functioning digital economy relies on healthy competition. Indeed, it is central to many of the Government’s core ambitions—especially being a tech superpower. But there is extensive and conclusive evidence that digital competition is not working properly. A handful of big tech firms dominate massively, and this is distorting markets.

In most cases we should let markets take care of themselves—I am no fan of regulation for the sake of it—but where there is clear evidence of market failure and distortion, regulators should step in to ensure a level playing field.

The Government’s proposed Digital Markets, Competition and Consumers Bill aims to do just that. However, I am concerned by reports that the Government are backtracking in the face of big tech lobbying. This gets a bit technical, but the key issue is how big tech companies can appeal against remedies the regulator decides. What is currently proposed is a judicial review, which is a widely respected and used form of appeal process in many comparable settings. It is quick, so decisions remain relevant to market conditions, it is fair and it is robust. Most importantly, it encourages a non-adversarial approach, so all parties have incentives to engage in good faith early on. That is how good regulation should work.

The Government are considering changes to this that would open up more extensive avenues for legal appeal, but we must seriously ask ourselves: who benefits, and what is the price? Expanding the grounds for legal challenge does not in itself make the process fairer, but it does favour those with the deepest pockets and creates incentives for protracted litigation to be the goal from the outset.

Big tech firms say there will not be proper checks on the regulator’s work, but that is the job of Parliament and we need to ensure we do it. It is accountability to Parliament, not toothless regulators, that will give us the better outcome. It takes courage to stand up to big tech firms, as my committee has seen from the growing number of SMEs engaging with us and speaking out. The Government got this one right the first time around, so I would be grateful if my noble friend could confirm that the Government will not change the Bill and will stand up for fair digital competition and the interests of UK businesses.

Digital competition is also a central theme of our inquiry into frontier AI large language models. Our evidence suggests that these models are laying the groundwork for epoch-defining shifts in the way our information environment works, the power of big tech firms, and global approaches to digital regulation. At the heart of this is a multi-billion dollar race between operators of closed source and open source models. Unsurprisingly, we are seeing some big tech firms dominating the field already.

Governments have a rare moment of steerage here. Government and Parliament will not be leading the AI research field, but we can determine what sorts of companies are allowed to flourish and within what parameters. We need to get this right. Today, the committee heard from Meta and Microsoft, and it will take evidence from OpenAI and Google DeepMind next week. By the way, on this country’s potential to compete, it is worth remembering that DeepMind was originally a British firm that has since been acquired by Google. Recognising the urgency of this, the committee is working at pace and will publish its report early in the new year.

Finally, I repeat our call for the Government to take digital exclusion more seriously. It is clear that the world is moving online at an unprecedented rate. Lots of this is positive, but not for those who cannot keep up. We must not let people’s ability to connect and use digital services become another dividing line. However, I am sad to report that the Government have refused even to update their decade-old digital exclusion strategy, which is so out of date that many of the organisations it cites no longer exist and its progress updates are in the National Archives. Sorting this out is low-hanging fruit. The economic case is sound and the practical suggestions have been developed. What is needed now is ministerial attention. Will my noble friend refer this again to the Secretary of State and ask that she reconsiders my committee’s key recommendations?

I share the Prime Minister’s ambition for the UK to be a tech superpower. We have the talent and the potential. We just need to remove some obvious obstacles so that we spread the opportunities, correct the current imbalance of power and ensure that we bring everybody with us.

--- Later in debate ---

[Lord McNally (LD)]

My Lords, it is always a pleasure to follow the noble Lord, Lord Knight of Weymouth, although I shall not try to match his skills as a barista. I was very interested but slightly disappointed in the speech by the noble Baroness, Lady Stowell—not that it was not, as always, a well-informed and pertinent speech, but I had hoped that she would speak about the Media Bill. We cannot fill in everything, I know, but I put it to her that both her experience in her committee and her past experience will make her a powerful influence in this House in getting the Media Bill right; I look forward to working with her on that Bill.

[Baroness Stowell of Beeston (Con)]

I thank the noble Lord for giving way. I did welcome the Media Bill. I did not want to go into detail because there is not time to talk about every Bill that is relevant to the work of the committee, but I can assure him that I will definitely play a part in the passage of that Bill.

[Lord McNally (LD)]

I never doubted it. One thing that has come up already is that these chances do not come along every day. I was on the 2003 media Bill, which has been mentioned, 20 years ago. No matter how eager Ministers may be later to tweet their handiwork, government business managers are not enthusiastic about giving more time to a matter that they think Parliament has got done and dusted, so we have to get this Media Bill right.

I am particularly interested in making sure that our public service broadcasters are well provided for—as the Minister said—in that Bill. We are very lucky in that little cluster of public service broadcasters which play such an important role. In a way, ITV retains many of its old regional strengths from its federation origins. Although it was not always realised at the time, Channel 4 gave an immense boost to our independent production; thank goodness we saved Channel 4 from privatisation.

For me, the BBC has always been the iron pole around which we build the credibility of our public service broadcasting. One thing that could be done, even at this late stage in the Parliament, is to end the endless war against the BBC from the Conservative Benches. It is a national asset. I always think of a comment by one of the great titans of American broadcasting when Reagan was deregulating public service broadcasting in the United States: “We will only know what we have lost once it’s gone.” That is one of the things that still motivate me to come to this House: the determination that we pass on to the next generation a BBC that is, as it is today, the envy of the world.

The other factor in the media section is the repeal of Section 40. I am pleased to see the noble Lord, Lord Black, in his place. I am quite sure that he has the same speech that he has been delivering for 20 years, but it is none the worse for repetition. We will come to that. I draw noble Lords’ attention to the letter sent today to Members from the Press Recognition Panel, which sets out the facts about Section 40. It is interesting that the politicians and the newspapers that have reported on the repeal of Section 40 have all presented it as a draconian issue whereby the winner has to pay both sides in a loss. They always omit to say that this would never apply if only our press would follow what was promised in Leveson and go through a proper media regulator. That offer is still on the table.

If the noble Lord, Lord Black, who has influence in these areas, can exert some of it, it is still possible to implement Leveson in full. That would provide a much healthier approach. We should not be waiting for princes of the blood royal and those enemies of the people, the judges, to regulate our press. That regulation should come from an industry confident enough to set up a proper regulator. On the repeal of Section 40, and if the Minister wants the background, I was the Minister in the Lords at that time. The Foreign Secretary will tell him what a double-dealing stab in the back it was by the Conservatives once they were free of the moderating hand of the Liberal Democrats and free to abandon Section 40.

The only other thing I will mention is that as a lifetime football lover and vice-president of St Albans City Football Club—a declaration of interest—I think this is a chance to get our national game into good order. I look forward to the words of my noble friend Lord Addington. Before him came David Mellor, Tracey Crouch and now the Fair Game campaign—all encouragement for us to get it right.

Advanced Artificial Intelligence

Baroness Stowell of Beeston Excerpts

Monday 24th July 2023 Lords Chamber

[Baroness Stowell of Beeston (Con)]

My Lords, I first congratulate the noble Lord, Lord Ravensdale, on securing this debate and on the comprehensive and interesting way he has introduced it. I signed up to speak for two reasons: first, because I thought I might learn something; and secondly, because I thought it would be helpful for me to highlight that the Communications and Digital Select Committee of your Lordships’ House, which I have the great privilege to chair, has recently launched an inquiry into large language models, focusing on how we can capitalise on the opportunities while managing the risks.

I am under no illusion: the latest advances in generative AI are significant, but we must not allow scaremongering about the future to be a distraction from today’s opportunities and risks. In the committee’s view, what is most important at the moment is to separate hype from reality and make a considered assessment of what guardrails and controls are needed now.

When we come back in September, we will take a detailed look at how large language models are expected to develop over the next three years, how well those changes are accounted for by the Government’s White Paper and our existing regulators, and what needs to happen to capitalise on the benefits and address the most pressing risks. That will include close examination of the structure, work and capacity of the regulators and government teams and their ability to deliver on the White Paper’s expectations. We are open for written submissions and are currently inviting witnesses. We intend to hear from a wide range of key players—from the big tech platforms and fast-moving start-ups to academics, industry experts, regulators, government advisers and institutions abroad.

A key part of our work will be to demystify some of the issues and make sure we are not blinded by the rosy outlook that tech firms are proposing or by doom-saying about the imminent collapse of civilisation. I do not know about noble Lords, but I cannot help thinking how convenient it is to the big tech bros that so few people understand what is going on, so we are going to try to change that through our inquiry. This is not just to mitigate anything bad happening that we do not know about, but to make sure that all the power is not concentrated in a few people’s hands and that the many exciting, potential opportunities of this technology are available not only to them.

Some industries are already seriously concerned, and with good reason. Those in the creative sector, particularly news publishers, are worried about intellectual property. The Minister covers IP policy as well as AI and will be aware just how important this issue is. I would be grateful if he updated us on the Intellectual Property Office working group, which is developing government policy so that news organisations, publishers, writers, artists, musicians and everyone else whose creations are being used by the tech firms to develop LLMs can be properly compensated, and commercial terms established that are fair to all.

Content creators are already seeing their work being used to train generative AI models. If studio businesses can get movie scripts, images or computer-generated background artists for free, why would they pay? The strikes in Hollywood are probably just the beginning of the disruption. In my committee’s creative industries report in January, we predicted looming disruption in the sector and called on DCMS to pay more attention. Sadly, we were right, although changes have come much faster than expected.

At the same time, we cannot wish these technologies away, and nor should we—they present massive opportunities too. We may now be at a critical juncture, both in securing UK competitive advantage in the AI race, and in preventing the risk of overmighty tech firms releasing technologies they cannot control. We need to get this right, and fast. I hope my committee’s work will play a role in shaping this debate and informing government policy.

I look forward to hearing much more on AI regulation in the coming months, and I hope the Minister and his colleagues will respond enthusiastically when we invite them to give evidence to our committee.